Good day. And welcome to the Okta First Quarter Fiscal Year 2020 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Dave Gennarelli, VP Investors Relations. Please go ahead, sir.

Good afternoon. And thank you for joining us on today's conference call to discuss the financial results of Okta's First Quarter of Fiscal '20. With me on today's call are Todd McKinnon, Okta's Co-Founder and Chief Executive Officer; Bill Losch, Company’s Chief Financial Officer; and Frederic Kerrest, the Company's Co-Founder and Chief Operating Officer. Today’s call will include forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our financial outlook, our market positioning. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Forward-looking statements represent our management's belief and assumptions only as of the date made. Information on factors that could affect the company’s financial results is included in its filings with the SEC from time to time, including the sections titled Risk Factors in its previously filed Form 10-K. In addition, during today's call, we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial measures and discussions of the limitations of using non-GAAP measures versus their closest GAAP equivalents is available in our earnings release. You can also find more detailed information in our supplemental financial materials, which includes trended financial statements and key metrics posted on our Investor Relations website. On today’s call, we’ll quote a number of numeric or growth changes as we discuss our financial performance. And unless otherwise noted, each such reference represents a year-on-year comparison. And now, I’d like to turn the call over to Todd McKinnon. Todd?

Thanks, Dave, and thanks everyone for joining us today. We kicked off fiscal year '20 with another strong quarter; total revenue grew 50%; subscription revenue grew 52%; calculated billings grew 53%; and we generated positive free cash flow of $13 million. We added 450 new customers in the quarter, bringing our total customer count to over 6,550. Once again, we made broad additions across our enterprise customer base with 53% growth in customers with annual contract value greater than $100,000. The sequential addition of 104 of these customers is even more than our seasonally strong Q4. What really excites us about these numbers is that well over half of these additions came from new logos, providing a clear indication that we are experiencing increased traction landing customers at scale in the enterprise market. The market tailwinds contributing to our momentum are the rapid growth of cloud and hybrid IT, digital transformation and security. These continue to strengthen and Identity plays a critical role in each of them. Organizations are turning to Okta, because we are uniquely able to address the broadest set of use cases across even the most complex technology environments. I'll share a few customer examples from the quarter that highlight our momentum. First, one of the world's largest banks was a significant new workforce Identity deal. The company was looking for a Cloud Identity solution to enhance their security profile, and reduce IT friction of managing over 1,200 third-party SaaS and hosted applications. The company selected Okta, because it could easily integrate with its current technology landscape, automate onboarding and offboarding of employees and help them transition into a hybrid cloud future. Another new workforce identity win was Takeda, one of the largest pharmaceutical companies in the world. After Takeda merged with Shire, the combined company needed to streamline access to all applications across their global workforce. Okta will provide Takeda's 37,000 employees with that secure seamless access so team members can collaborate more effectively. A new customer identity win was with a Fortune 100 global technology company. The company was looking to modernize its IoT marketplace, and improve the experience for its reseller partners. The company will implement Okta's Customer Identity products to provide secure, flexible access to partners when ordering IoT products and services in their IoT marketplace. Lastly, eMoney Advisor, a leading provider of financial planning software, serving more than 60,000 financial professionals and 4 million households in the U.S., was a noteworthy Customer Identity upsell. The company has selected Okta to secure its customers' and partners' sensitive data by providing seamless access to eMoney and resources and applications. What these organizations and many of our other customers have in common is that they are becoming technology companies by necessity. Today, an organization's capacity for technology is what will determine its success. And we've built Okta Identity Cloud to enable that transition with the speed, scale, security and flexibility that our customers require. We are on the forefront of capitalizing on three broad technology trends. First, we are the platform to enable cloud adoption and hybrid IT. Organizations are rapidly adopting the cloud. These best-of-breed solutions need to co-exist with their existing on-premise applications and infrastructure in a frictionless way. One of their biggest challenges is ensuring the right people are able to access the right technologies at the right time regardless of where they're located. This is why Identity has become so important. But unlike traditional identity solutions, Okta is an independent platform that is purpose-built for diverse environments and enables customers to adopt new technologies in a fraction of the time that it would take with legacy solutions. With Okta, companies like Hitachi are able to replace legacy systems, consolidate access and accelerate technology adoption for more than 300,000 employees across hundreds of business units. Second, we have the platform to enable digital transformation. Okta is a true platform in the sense that it is extensible, flexible and easy to connect to and build on. Rather than building identity functionality themselves, companies like Allied Financial and Cardinal Health rely on Okta as the identity layer for their customer-facing applications. This enables them to focus their developers on building core functionality, so that they can get to market faster, while also leveraging the full scale and security of Okta to protect the identities of their millions of customers. Third, we are a platform to enable Zero Trust security. Mitigating the risk of security breaches is one of the top concerns of CEOs and boards face. And it has brought a lot of attention to this concept of Zero Trust. Security is now identity centric and requires organizations to never trust and always verify users who are trying to access resources. For customers like NASDAQ and AECOM, Okta lays the foundation for Zero Trust, because of our advanced access management capabilities and real-time threat data that can be used to proactively protect organizations from attacks. At Oktane last month, I talked about how our strategy is rooted in making our customers successful through our leading products, our growing set of integrations and use cases, and the increasingly valuable data that we collect through millions of people using our service every day. As we built more products that leverage these integrations, we unlock more use cases, attract more customers, and generate more data that can be used to build better products and make our customers more successful. The result is a powerful network effect that we believe we're uniquely positioned to leverage, and the announcements we made at Oktane are a significant step forward in accelerating every aspect of the strategy. The first announcement we made, risk-based authentication, shows how we’re using data to make our customers more secure. When someone attempts to sign-in, Okta analyzes the user's context, including their device, location, and network. Based on this data, they are assigned a high, medium, or low-risk rating, which automatically determines and enforces an appropriate access decision. The second Oktane announcement was Okta Hooks, which makes the Okta platform completely extensible with Hooks; developers and IT teams can customize authentication or user registration flows to include calls to third-party systems. Hooks can be used to enable things like a deeper level of user verification or more streamlined account creation, enabling us to infinitely extend our integration catalog. As our customers build these integrations, they can be published to the Okta integration network for our broader community to leverage, further accelerating the network effect I discussed earlier. We’re also making the core functionality of our platform more customizable to enable our customers to address an unlimited number of use cases. The third announcement out of Oktane was Okta Identity Engine, a set of customizable building blocks for every identity experience. We’ve essentially made the core functionality of our products consumable, such that our customers can customize their identity experiences in the way that best suits their business. We also announced two brand new products at Oktane. First, Okta Access Gateway enables seamless access to on-premise applications that our customers, especially large enterprises, can use Okta for secure access from cloud to ground across their hybrid environment. And lastly, Okta Advanced Server Access, which is generally available today and already being used by dozens of customers. Advanced Server Access uses continuous authentication and centralized access controls for on-premises, hybrid, and cloud servers. Secure access to services is a critical and underserved use case, and we're very encouraged by the positive response this new product has already received from our customers. And in other news this quarter, we are very excited that Diya Jolly has joined us as our new Chief Product Officer. Diya brings over 15 years of experience, leading product development at some of the largest enterprises in the world, and most recently was VP of Product Management at Google, where she drove large-scale adoption of some of their most critical products. We're thrilled to have her on the Okta team, and are looking forward to continued innovation. In summary, I'm very pleased with how we started fiscal year '20. Momentum continues to be on our side, both in terms of the market tailwinds that are powering our business, as well as the innovation we're driving. We are seeing great traction on all fronts and remain focused on executing against the large market opportunities in front of us. Thanks again for your time. And I'd now like to turn the call over to Bill to walk through our financial results. Bill?

Thanks, Todd. And thanks again to everyone for joining us. I'll go through our results for the first quarter and then discuss our business outlook for Q2 and the full year. As Todd mentioned, we maintain the strong momentum we had exiting Q4 and experienced better than expected growth in many areas, including revenue, calculated billings and cash flow. Subscription revenue totaled $117 million in the first quarter, an increase of 52%, representing 94% of our total revenue, up from 92% in Q1 last year. Revenue from outside of the U.S. grew 60% and represented approximately 16% of our first quarter revenue compared to 15% in Q1 last year. We continue to view our international business as a long-term growth driver and are investing to expand our international footprint. An example of this is our recent hosted data center expansion in Asia-Pacific, and the new office that we opened in Germany, which were both announced this afternoon. Another source of revenue growth is from the momentum of our partner resale channel. While still in its early stages, the partner channel already contributes over a quarter of our business. These channel partners provide Okta with a global reach and scale that we wouldn't be able to efficiently achieve on our own. Moving on to billings, total calculated billings grew 53% and current calculated billings increased 54% over Q1 last year. The strength in billings continues to be driven by both new and existing customers across enterprise and commercial. Billings also benefited from strong bookings within the quarter and a particularly strong third month. The strong close relates to a combination of factors, including the momentum of our business and some beneficial invoice timing. That's a good segue for me to provide color on remaining performance obligations or RPO for the first time. It's likely that you've heard other software companies reference RPO or backlog, which for us is contracted subscription revenues, both billed and unbilled that have not yet been recognized. We've been reporting RPO in our quarterly SEC filings since Q1 of last year as part of the adoption of ASC 606. We report both current RPO, which will be recognized as subscription revenue over the next 12 months and total RPO. Total RPO at the end of Q1 was $792 million and we expect to recognize $416 million or 53% of that over the next 12 months. Growth in total RPO was 59% and current RPO grew 49%. We only have five quarters of history with this metric. And as such, RPO should be viewed as simply an additional metric to gauge our performance in the quarter. Year-over-year growth in current RPO is a more meaningful metric when also viewing subscription revenue or billings growth. Billings can sustain variability caused by changes in invoice duration and invoice timing, while RPO can reduce some of the variability seen in billings, because it eliminates variances in these invoice dynamics. However, RPO can be influenced by factors such as contract duration and renewal cycles. There will be some quarters where growth in calculated billings outpaces growth in current RPO like we just experienced in Q1 and vice versa, depending on the influencing factors I noted. Turning to retention. Our dollar-based net retention rate for the trailing 12-month period remained strong at 119%. This represents a 1-point sequential decrease and is a natural reflection of the larger initial deals we're achieving with enterprise customers as evidenced by the 53% growth in customers with over $100,000 in annual contract value that Todd mentioned. So as we increasingly target large enterprise customers and initial deal size continues to grow, we believe our dollar-based net retention rate will remain very healthy and may fluctuate a bit from quarter-to-quarter. Turning to gross margin. Subscription gross margin continues to be strong at 81.8%, up 110 basis points versus the first quarter last year. Total gross margin was 75.7% in the first quarter, up 160 basis points. Gross profit grew 53%. Now, looking at operating expenses. Total operating expenses for Q1 grew 68%. The increase is primarily driven by sales and marketing investments as we look to capture more of our large addressable market win more of the world's largest organizations and expand geographically. Importantly, we also moved the timing of Oktane from Q2 last year to Q1 this year. The overall expense growth reflects what we talked to you about last quarter, and the commitment we've made to investing in our strategic priorities, which include driving business with the world's largest organization, strengthening the network effects of our platform, the Okta Integration Network, expanding our presence with Customer Identity, and investments in security with the Okta Identity Cloud. As usual, the biggest components in the spend increase is related to scaling headcount to support these strategic initiatives. We've been successful in attracting and retaining great talent, and total headcount grew 40% to 1,770. We continue to invest in our business as we scale for durable growth. Operating loss in the first quarter was $25 million, a margin of negative 20% compared to negative 13% in the same period last year and reflects the increased investments I just noted. Keep in mind that Q1 each year experiences operating margin seasonality due to the reset of payroll taxes, expenses related to our annual worldwide sales kick-off event, and as I said, the shift in Oktane timing to Q1 this year. Net loss per share in Q1 was $0.19 with 113 million basic shares outstanding. This compares to a net loss per share in Q1 last year of $0.09 with 104 million basic shares outstanding at the time. Our top line performance and seasonally strong cash collections drove our solid cash flow performance. Operating cash flow was $21 million in Q1. Operating cash flow margin was 70% compared to 5% in Q1 last year. Free cash flow was $13 million positive for the third quarter in a row. Free cash flow margin was positive 11% compared to negative 2% for Q1 last year. We remain encouraged by these results and expect the continued variability in cash flow margins due to ongoing fluctuations in working capital, the growth in enterprise business, and seasonal factors. We ended the first quarter with $547 million in cash, cash equivalents and short-term investments. During the quarter, we adopted the new lease accounting standard ASC-842 to reflect our operating leases on the balance sheet, resulting in the new operating right of use assets and liabilities line items. We have recast our prior year balance sheets to reflect the adoption. This has no impact on our current and prior period income statements or cash flows. Moving on to our business outlook. We remain optimistic about the current demand environment. And based on our strong first quarter results, we are raising our full-year outlook. For the second quarter, we expect total revenue of $130 million to $131 million, representing a growth rate of 37% to 38%; non-GAAP operating loss of $14.9 million to $13.9 million; non-GAAP net loss per share of $0.11 to $0.10, assuming shares outstanding of approximately 115 million. For the full fiscal '20; we are raising our guidance and now expect total revenue of $543 million to $548 million, representing a growth rate of 36% to 37%; non-GAAP operating loss of $66 million to $62 million; non-GAAP net loss per share of $0.49 to $0.45, assuming shares outstanding of approximately 116 million. In summary, we had a strong quarter and a great start to the new fiscal year. The overarching trends that are propelling our business remain in place, and we believe we are still in the early stages of this tremendous market opportunity. As such, we are making the appropriate investments to innovate our platform, fuel growth, further enhance our competitive positioning and capitalize on the tremendous market opportunity.

And with that, Todd, Frederic and I will take your questions. Operator? Thank you. We’ll take our first question from Rob Owens with KeyBanc Capital Markets. Please go ahead.

Great. And thank you guys for taking my question. As you’re seeing this increased traction with enterprise accounts and the move upmarket with customer acquisition. Is that coming vis-à-vis the channel or is that coming more so direct at this point? And as channel contribution ramps, do you think that will be across the market, mid-market? Maybe just give us some flavor there.

That’s a great question. The factors you mentioned are certainly important, but let me take a step back. What we’re seeing across the business is that organizations of all sizes and from every industry are figuring out how to leverage the cloud, undergo digital transformation, and ensure security in these processes. These are significant and ongoing trends that we have discussed frequently. This is particularly evident among larger enterprises that are driving our growth. When we refer to large enterprises, the role of the channel is significant, including systems integrators that assist these companies in adopting the cloud, transforming digitally, and maintaining security, especially in international markets where reseller channels play a crucial role. Furthermore, not only are enterprises keen to benefit from these broader trends, but channel partners are also recognizing substantial opportunities in aiding companies with cloud adoption. Overall, this creates a very favorable situation for us.

And as a housekeeping follow-up. Bill, do you have a fully diluted share count for us?

Rob, the fully diluted share count that I would use is 136 million.

And we'll take our next question from Heather Bellini with Goldman Sachs. Please go ahead.

Two questions; the first is maybe if you could talk to us a little bit about how the message of Identity Cloud is resonating, and how this might be impacting the size of initial lands? And the second question is just, if you look at the increase in customers greater than 100,000, you actually added more in Q1 than you added in Q4, and it was almost double the amount from a year ago. Can you share with us what's driving that incredible momentum? Thank you.

The Identity Cloud has been interesting to observe. When we first introduced it eight years ago, it was a novel concept. The idea was that sufficient infrastructure and application stacks would be provided from the cloud, making it logical to have security, identity, access control, and access management also cloud-based. Over the years, particularly with larger enterprises, the understanding of this shift has significantly evolved. Instead of us having to advocate for this approach, many companies are now actively seeking it. This shift is powerful and aligns with the impressive results we see today, driven by macro trends that favor the Identity Cloud. Successful implementations by larger companies have led others to recognize the potential for similar achievements. Companies are motivated to follow the examples set by their peers, which is a significant factor in our success. More than anything, enterprises are realizing the value of cloud solutions, wanting to harness this technology to enhance efficiency and drive their businesses forward as digital entities, all while ensuring security. The message that the Identity Cloud is essential for this transformation is clearly resonating, creating a compelling synergy that contributes to our positive results.

And Heather, I would just add. This is Frederic. I would just add to that that you have to keep in mind it's still very, very early in the business. I mean, the opportunities ahead of us in these markets are large. And I think when you start to see things like last quarter we talked about some large federal opportunities where they're starting to come to us with the State Department. This quarter, we have one of the world's largest banks that is now adopting the Okta Identity Cloud for workforce, because they're moving to hybrid. When you start to see these large markets that are typically not the first early adopters of modern technology, that's where it starts to get exciting. And I think that times ahead are going to be very interesting as more and more of these large organizations realize the opportunities and the power of the cloud.

And any comment just on the fact that you were able to increase your net adds above? You usually don't see Q1 better than Q4. I mean, is there anything that you think just…

It's a good question, and we're very happy with our progress. We've been focused on larger enterprises for quite some time now, and the growth is driven by customer success and market trends. It's not due to any single tactic or specific action we've taken; rather, it's the result of consistent and effective execution coming together.

And I would just add that keep in mind we're an organic software development company. So we're going to keep building products. We rev the product and come out with new releases all the time that's more and more used cases that we can solve, that's more and more opportunities for people to take different components of the platform and address them. So you're just starting to see more and more organizations who can find different ways of leveraging the Okta Identity Cloud to move their businesses forward.

And we'll take our next question from Jonathan Ho with William Blair. Please go ahead.

I just wanted to start out with one of the large announcements you made around Major League Baseball. Could you maybe give us a sense of how that additional revenue uplift, what it looks like? And how these external use case opportunities can maybe add-up over time?

Yes, I'm more than happy to discuss that. Major League Baseball has been a customer of ours for a while now. They initially implemented our services at their headquarters, and gradually more Major League teams began using the Okta Identity Cloud for their staff and teams. Initially, the deployment was relatively small. However, as they worked to modernize MLB and mlb.com, they recognized the need for greater digital access and the importance of appealing to younger, digital-savvy customers. They understood that upgrading their entire infrastructure was essential, and we were able to accomplish this swiftly. We had everything ready by opening day, which was a huge win for them. Consequently, for all the millions of users accessing mlb.com, whether streaming games or receiving live updates, everything was powered by Okta. We're very pleased with how the deployment has turned out. Regarding the economic uplift, our business comprises two key components: workforce identity management, which is charged per user, and customer identity and access management, which is based on authentication levels. They utilize a specific number of authentications for access, and as customers succeed with customer identity and access management, we benefit alongside them as they grow in that market, and these projects become increasingly successful.

Yes, I would just listen to Freddy explain that. One thing that popped into my mind is that as the product and platforms have gotten more powerful, both on the workforce side and on the customer identity side, we're seeing that it's a benefit of they are interested in us, companies are interested in us, because we can offer more use cases for them. But also the initial deals get bigger, because they start looking us for one part of the platform, and end up buying initially even many parts of the platform. A good example of this is we've had a standalone multifactor authentication product for a number of years. And what we've seen increasingly happen is people evaluate us just for multifactor authentication and they see the benefits of having that tightly integrated with the whole identity platform and they end up buying more of the multifactor authentication upfront. So it makes that initial deal bigger, which I think is very positive for the business.

Can you maybe give us a sense as well, when you talk about Zero Trust, how are customers looking at this as an opportunity to increase their security? How does ScaleFT fit in with this? And again, what does it look like from an economic perspective in terms of the Zero Trust side?

Zero Trust is a significant trend that encompasses a broad definition. Essentially, it refers to an environment where there is no separate secure and trusted network behind a firewall, and an untrusted outside network. Instead, everything is treated as untrusted. The benefit of this approach is that it provides users with much greater access and flexibility, whether they are in the office, working remotely, or accessing data from a data center. For Okta, this means that to establish this environment, reliance must be placed on identity rather than network parameters. It's crucial to have an identity system that can determine who should access a resource, the timing, and the device used. As companies strive for enhanced security and a more flexible Zero Trust setup, they need a strong identity solution, putting us in a favorable position. ScaleFT is particularly noteworthy; we initially acquired the company for its key technology that supports continuous authentication in the Zero Trust landscape. This technology enables us to gather extensive information about devices, allowing for robust authentication regardless of the user's location. Additionally, we discovered that their product, which ultimately became Advanced Server Access, was highly successful on its own. We recently announced the general availability of the fully integrated Okta product, Advanced Server Access, which has consistently surpassed our expectations. We have had to revise the product's forecast upward since we began selling it late last year, benefiting us on multiple fronts. This illustrates our overall approach to mergers and acquisitions; while we primarily focus on organic growth by developing our technology, we remain open to opportunities where customer demand exists or where we can integrate valuable technology that aligns with key trends, as demonstrated by the successful integration of ScaleFT.

And we’ll take our next question from Gray Powell with Deutsche Bank. Please go ahead.

Thank you for taking my question and congratulations on the strong results. Dave, can you help us understand the upcoming launch of your Access Gateway products and the potential to support more on-premise applications? Do you believe this will have a significant impact on larger enterprise accounts? Additionally, how do you see this product affecting deal sizes? Thank you.

So Okta Access Gateway, as you mentioned, is another one of the exciting announcements that we made at Oktane. It is live in a while with a first set of customers right now. And we’re very excited about this product, because as we had a question earlier about the growth in larger organizations adopting the Okta Identity Cloud. Those large organizations, it is very early innings for them in terms of thinking about how they’re going to deploy more and more cloud technology. And the reality of it is enterprise IT, they don’t throw anything away; they glue new things on the front. And so these large organizations are thinking about how they can take advantage of the investments they’ve made today, but still take advantage of all the modern aspects of the cloud. The Okta Access Gateway gives a lot of these larger organizations a very simple, easy, powerful way to connect their on-premise applications that use things called header-based authentication and integrate them with the Okta Identity Cloud. So we'll still have all the capabilities and capacities of the Okta Identity Cloud for their deployments. But they can now very powerfully plug-in their on-premise infrastructure. Traditionally, they use products from companies like CA and others to do this technology. But they want a modern way of moving forward, and that’s what Okta Access Gateway allows them to do. In terms of the second part of your question, Gray, around the revenue from it, there will be revenue from it. But that's not really the main driver here. The main driver is helping these large organizations find more and easier ways to get going with the cloud and to adopt the Okta Identity Cloud. We're really looking to make sure that this first set of enterprise customers over the next quarter or two is happily deployed, very successful, and understands how it all works. And we think that that's a trend that's going to be very powerful in the times ahead.

And we'll take our next question from Sterling Auty with J.P. Morgan. Please go ahead.

I want to circle back to the one, the question that Rob Owens started. We are getting a growing number of questions for investors, just understanding the source of the growth, talked a lot about the large enterprises. So maybe to ask the question this way. How would you stratify your revenue in terms of what percentage of revenue is now coming from large enterprise versus midsize enterprise versus even SMB?

We don't provide a detailed breakdown like that. However, I can say that our internal plans and strategies show that we have achieved success with large enterprises. It's a significant market, and we see a lot of potential there. Our investments and focus reflect this. In addition, we're performing well in the mid-market and even the commercial market. Overall, it's balanced; large enterprises are doing well. As we've mentioned during the call, the potential for growth, especially in large enterprises, is enormous, and we're committed to capitalizing on that in the long term.

And then, Bill, maybe one for you. You talked about the hiring. How should we think about the pace of hiring through the year? Are you front-loading more of the hiring? Or should we expect the onboarding of new headcounts to be equal through the year?

This year, we are concentrating on investing in the strategic areas we discussed last quarter and at Oktane. We will maintain our focus on investing in customer-facing roles and research and development, as we see significant opportunities ahead. We plan to continue hiring aggressively, and the headcount growth we experienced in the first quarter was 40%. Expect that growth to accelerate in the second half of the year because we recognize strong strategic opportunities to pursue. We are successfully attracting and retaining talent, and we aim to keep that momentum going. We will continue to make thoughtful investments to leverage what we believe is a substantial market opportunity and drive our growth.

And moving on, we will take our next question from Melissa Franchi with Morgan Stanley. Please go ahead.

This is Hamza Fodderwala on for Melissa. Just wanted to see if you could share any color on your traction outside of MFA and SSO, particularly with Lifecycle Management. And then as a follow-up for Bill, you mentioned the dollar net retention being down about a point sequentially given the larger initial lands. Should we expect that going forward as you increase your enterprise adoption that should remain in that 115% or 120% range, or could it move forward? And that's it from me, thank you.

I'll take the first question around how the products are doing. They are all doing very, very well. Certainly, single sign-on Universal Directory continued to do very, very well across all the segments. Same is true for multifactor authentication and Lifecycle Management. We do see a lot of opportunities in all of these areas. Obviously, we added an adaptive version of single sign-on and an adaptive version of multifactor authentication last year, because there are more and more signals in the systems, so a lot of data that we can help our customers with. But as you think about Lifecycle Management, there's a lot of different ways that we can enhance that product. And in fact, that was one of the drivers in our purchase of Azuqua last quarter, which I think is important to highlight. First of all, there's a lot of things that happen with our existing LTM product, and it's pretty deep. So for a lot of pre-configured workflows, it addresses a lot of opportunities there. But Azuqua is going to allow us, which is now Okta Workflows, to do more and more there. And Workflows is going to not only strengthen that offering, but also allow us and our customers to essentially manage more and more workflows. And you're going to start to see more and more of that as we continue to deepen and broaden the Okta Identity network, and as we continue to think about how we can enhance capabilities in the system. You have to realize more products obviously mean bigger upfront deals. And so what you're going to see is with introductions like Hooks, which we talked about at Oktane as well, you can now really configure the system with the base functionality that you have, whether that's UD or SSO, but also with these advance functionalities to have different workflows to drive different triggers and events out of the system. And there is a lot of capability and flexibility there for customers to leverage the Okta Identity Cloud.

And as it relates to the net retention rate, you're right. As we target larger enterprise customers, as we build our customer base, which are all very healthy indicators for the business. And as those initial sizes continue to grow, we do expect to see some fluctuation in the net retention rate. I think it will be at the very healthy level we are right now at 119%, and in a range that might go up or down a few points. So the range that you talked about of 115% to 120%, I would say it would be a comparable range for you as far as your modeling.

We'll take our next question from Gregg Moskowitz with Mizuho Securities. Please go ahead.

Okay, thank you and good afternoon guys. Congratulations on a strong quarter. So you mentioned the high level of demand around multifactor authentication a few moments ago. But I'm just wondering what uptake you've been seeing around adaptive MFA, in particular over the past few months or so?

It’s performing exceptionally well. Whether it's a deal focused solely on adaptive MFA that later expands to include broader elements of the platform, or interest stemming from the multifactor product and upsell of adaptive MFA or the comprehensive suite, it's showing substantial strength. Overall, Okta enhances security, visibility, and technological enablement. Specifically, the multi-factor and adaptive multi-factor authentication products are our most security-focused offerings. As organizations seek to enhance their security measures, we are seeing a significant increase in demand. Thus, it plays a crucial role in our suite, both in terms of revenue and as a strong entry point into the entire platform.

And just sticking to a couple of quick examples there, you can think of a situation with financial services company. We have some customers who have private wealth management businesses where they want that adaptive technology to make sure that right consumers are accessing obviously the right financial records. You see the same thing in the government. I don’t know if all of you are aware. But the Office of The President released a memo last week, specifically around basically Zero Trust and making recommendations around shifting from simple managed access to making it more complicated. There is a lot of opportunities to do that with multifactor and adaptive multifactor authentication in the government as well. And then finally, we have a number of large manufacturing customers who use the Okta Identity Cloud to solve some supply chain opportunities. And in that case, you want to make sure that you’re allowing the right person to access the right supply chain, whether that’s a customer or a supplier. And you might want to do that with real-time signaling, and that is what makes it adaptive. So there’s a lot of flexibility there and different ways in which the customers were adapting that product and baking it into their workflows.

Okay, that’s very helpful. And then Freddy just a quick follow-up on Azuqua, or Okta Workflows. Is still your expectation that that will be more or less fully integrated with lifecycle management in under a year or so?

Yes, absolutely. So we are already doing very well with that. It’s just been a couple of months and we’ve already seen some very good integration work to kick it off. I think that within the next quarter or two, customers are going to be able to take advantage of some of the advanced functionality using Okta workflows. And certainly, it’ll be fully integrated within the year absolutely.

And moving on, we’ll take our next question from Shaul Eyal with Oppenheimer. Please go ahead.

Thank you. Good afternoon Todd, Freddie and Bill. Welcome on board, Dave Gennarelli. Congrats on continued outperformance and the improved outlook. I wanted to ask about the ongoing traction you’re seeing with your channel partners. As you’ve indicated, I believe it represents 25% already of the business. What should we be expecting down the road as we think about your five-year plan with respect to channel contribution?

Yes, absolutely. Thank you, Shaul for the kind words, happy to talk about that. So for those of you who might not be as familiar with the story, partners and channel partners to us, there are a couple of different buckets of it. The first one obviously is independent software vendors, so organizations like Microsoft Office 365, Workday, ServiceNow, Salesforce, where they're very good partners of ours, because obviously integration with the Okta Identity Cloud means faster deployments and better results with those products. Secondly, the global system integrators, in particular there have been a number of comments on today’s call about how we’re going to be with large enterprise, whether it's Accenture, Deloitte, PWC, they're all building very strong practices around Okta, which is great. We saw them as very strong sponsors of the sales kick-off which happened in February as well. And they're all getting more and more trained and certified, whether it’s for their security practices. So implementing for Workforce or helping large organizations with digital transformation in a managed service environment. And then finally, there's a lot of regional identity experts and consulting firms who are partnering with us to bring Okta Identity Cloud out there to the channel. In particular, what you're talking about Shaul there, is also international; is a huge opportunity for us. We're very happy with the overall growth of the business. International obviously grew 60% year-over-year, which is phenomenal. But there's a lot of opportunity out there. We're excited to open offices where it makes sense, like we just did in Germany. But in a lot of the other territories where every organization is looking to adopt public cloud services and think more about this hybrid environment, we are going to partner more and more with organizations to do that in the channel. So you're going to continue to see that. What does the model look like over the next three and five years? We don't have specific numbers that we're sharing at this time. But I think that having a quarter of the business impacted by the channel today is very, very good. And I expect that strong growth to continue in the times ahead.

And I would just add to that it's a super important part of our strategy because it really is a differentiator. Because if you look at the competition broadly, we're the only scale player that doesn't have an infrastructure platform that we're trying to sell or an apps platform, we're very neutral. And that resonates with all of the partners in the channel, because they see us as a neutral party; they can bring their customers that will then give them choice. And so the channel network and the relationship bolster our competitive positioning, our competitive moat. So while we aren’t giving specific numbers over time, it is an area we're very interested in investing and making productive, because it is that competitive differentiator.

Thank you for that. And if I may my follow-up, so the Access Gateway, the Advanced Server Access products recently introduced during Oktane. Given its on-premise focus, do you see a new list of competitors when you've recently started going out with both these products?

I would say, maybe on the edges. But what we find is that, first of all, these products like a lot of our products are pulled from customers. Meaning customers request these things. Customers want to connect Okta to more on-premise resources. Customers want to use Okta to secure more things. So we build products in response to that. So what that means is that if there was a great solution in the market, if there was some competitor that just excelled at the use cases, the customer probably wouldn't be asking us for it. So we find ourselves putting these products in greenfield places where there's a lot of room to run before there's any competition. So even though some of these areas might seem adjacent to other vendors you follow or may have heard of, the reality is what we find is when we really talk to these other vendors, there's way more partnering we do than competing, and that governs our behavior. If you look at our relationship with SailPoint, or a company like CyberArk, it's a very positive, synergistic relationship. Although, on the surface, it might seem like we're bumping up against each other. What we find with customers is that we can do far more together than we can do by fighting each other.

And we'll take our next question from Alex Henderson with Needham. Please go ahead.

The last question actually feeds very nicely into the question I wanted ask. There was a SailPoint patent that was filed recently, addressing identity risk technologies and granted to them. And I know at the Oktane19 event, you had launched a product that actually overlaps pretty heavily with what they offer in that space. And I was wondering if there's any implication for that patent relative to you guys?

I am not familiar with that specific patent. We hold a number of patents, and many vendors do as well. However, I can say that our relationship with SailPoint is strong. We do have some overlap in lifecycle management areas. What we've discovered is that when we engage with customers, our collaboration is very productive because SailPoint excels in governance functionalities. They perform well with on-premise software deployments and governance for those, while we focus more on cloud solutions. Therefore, the partnership is solid, and I am confident that it will continue well into the future.

I’d like to ask about the impressive attendance at Oktane over the past two years. Can you explain how that attendance leads to new customer acquisition after the events? It seems you had around 8,800 attendees at the recent show, which is quite significant for a company of your size, comparable to Cisco Live. Does this attendance result in specific deals within a reasonable time following the events?

Certainly, Oktane has grown significantly over the last year since we started. And I think it's a testament to these tailwinds that we're focused on around more cloud, more digital transformation and prioritizing security. Originally, we started just because there is so much innovation coming out of the platform we just wanted to keep customers up-to-date on what was happening. They get so many releases of the software. This is a way for us to tell them here are the big things that you received and here are the big things that are coming. That was the original idea behind it. It started to grow pretty fast and now there are obviously more and more customers that are attending, not only to see exactly where we're going but also to make sure they are leveraging all the products and all the different use cases they can address. So there are a lot of customers who attend and then realize they can purchase new products or find new ways to address use cases, which is great. But there's also more and more prospective customers who are hearing about Okta and who are working with either our account teams or channel partners and say I should go find out more about that. Certainly, I think that it does drive not only retention but new business, both in existing customers and in new prospective customers. The main driver there in terms of the timing of it and moving it up from Q2 to Q1 really had more to do with the way that they the cadence of running the business on an annual basis. It doesn’t have anything to do with the timing. Obviously, the subscription business, the business is going to come when it's going to come and we recognize it ratably. So, there is no upside to it there, but we are excited about the growth of the event. I think this year we had, obviously, a record attendance but also record number of partner attendance, both on the software side as well as channel partner side. And I think that really speaks to the opportunity for people to take advantage of the products and the Okta Identity Cloud platform. And that’s really what they’re getting out of it.

Moving on, we’ll take our next question from Andrew Nowinski with Piper Jaffray. Please go ahead.

So you’ve launched a number of new products targeting new markets, including the on-premise hybrid environment. I'm wondering, do these new products change the average contract duration relative to your historical duration?

I don’t believe there have been any significant changes yet due to these new products. Overall, what we are observing is consistent with our previous experiences regarding multi-year contracts. As companies grow larger, their preference shifts towards longer contract durations, sometimes extending to three or even five years. Switching an identity platform, whether for workforce or customer identity, is a significant task for a large organization, so they want to ensure a long-term partnership with us. This allows us to truly develop the relationship. Particularly with products like Okta Access Gateway, which are designed for enterprise businesses that are keen on leveraging the hybrid model, we expect this will lead to longer-term agreements. However, there is currently no specific factor driving this change.

One thing I would prefer to is, to Freddie's point that the larger enterprise deals and some of them ones that we specifically landed, have had longer contract lengths. I mean we’re just starting along with you guys to really understand RPO and backlog. But if you see the year-over-year growth in our total backlog of 59%, the biggest driver as we know of that number is contract duration. So that’s what you’re seeing there with that growth.

And then along those lines, given all the new products you’re offering. I'm wondering, is there any metrics that you could share with us in order to track your progress and how these are being adopted, whether it’s the average number of products per customer or perhaps the percentage of customers that have deployed, call it, three or more solutions?

Yes, I mean we have had continued success with all of our customers, our customers on average deploying a number of the products. As we’ve talked about before, we still have all of those products at scale. We continue to see a little bit more increased traction on LCM, Lifecycle Management and multifactor authentication, but they’re all going strong from that perspective.

And we’ll take our last question from Joshua Tilton with Berenberg Capital Markets. Please go ahead.

Hey it's actually Ganwun Zahir for Josh. Thanks for taking my question. The first one I want to have is just around the enterprise market, again. If you guys are moving more into enterprise, I'm looking to CSOs. How is perception changing from access management to becoming a security partner? And what are the implications in terms of expecting the larger deals, adding more and more products?

Yes, happy to talk about that. What we are seeing, as you mentioned and as we've discussed on the call is the world’s largest organizations are seeing more and more opportunity to leverage the various parts of the Okta Identity Cloud, again for very straightforward reasons. First of all, they want to adopt more cloud for their workforces, and they want to do that in a hybrid capacity. Second of all, they need to focus on these digital transformation initiatives, because every company is basically under attack by new software modern technology companies. You look across industries, whether its financial services, or healthcare, or retail, they have to do this. And then you do it quickly, because it hits the top line of their businesses. And that's why we're seeing a lot of opportunity with customer identity and access management. And finally, security is a priority at the C-level and the board level, and all these large organizations. You mentioned CSOs, Chief Security Officers, they have become a much more important part of the buying process over the last two or three years. They've become a significant number of executive buyers and decision makers for us in large organizations. And they have a lot of challenges on their plate. They're looking for partners who can help them address some of these major concerns quickly, efficiently, effectively, and identity is at the core of that. So typically, we engage with these Chief Security Officers. We help them understand what we do. We show them quickly how we can help them solve specific problems and then we get rolling. And they become not only strong advocates of ours, but also great partners in terms of helping us, as Todd mentioned earlier, think about what we want to build next. When we think about products like Advanced Server Access, we're getting pulled by these customers into these new opportunities in these new markets. And they're saying we're looking for a modern way to solve these modern problems, and we're hoping that Okta can help us do that more. And that's why we're very bullish about the opportunities ahead.

And just to follow up on that one. You've mentioned the pull, which is an interesting concept, when you prove your concept and then the product becomes more of a pull. In the enterprise market itself, you have the partnerships in place with the system integrators. You have technology partners, even the security guys. And then Access Gateway links you to on-premise; so all the pieces seem to be in theory in place for the enterprise market to become more pull. Are you seeing that? Or is it still more of a push market? And I'm obviously implying what the relationship for that could be on implication on OpEx in the future as well as this becomes more of a pull market? Thank you.

Yes, I believe it's not a straightforward situation. We are making progress, but it’s still early. That’s what makes it so exciting. The progress is significant, and the opportunity remains large. We are committed to working hard to take advantage of it.

And that was all the time we had for today's question-and-answer session. I would now like to turn the call back over to Mr. Gennarelli for any additional or closing remarks.

Well, thanks for joining us everybody this afternoon. Coming up just next week, we'll be attending the Baird Conference in New York on the 4th and the William Blair Conference in Chicago on the 5th. So we hope to see you at one of those events. And if you have any additional questions, you can reach me at [email protected]. Thanks.

Once again, that does conclude today's conference. Thank you for your participation. You may now disconnect your phone lines.